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The contribution of direct taxes to total tax revenue climbed to 56.72 per cent in 2023-24, the highest in 14 years. The surge was even more stark in the direct tax-to-GDP ratio — the share of direct taxes in the overall economic output in the country — which jumped to over a two-decade high of 6.64 per cent, time-series data released by the Central Board of Direct Taxes (CBDT) under the Ministry of Finance showed Thursday.
With the direct tax to total tax revenue increasing in FY24 from 54.63 per cent the previous year, the share of indirect taxes to total tax revenue is now down to 43.28 per cent. The last time the share of direct taxes had zoomed higher than the 56.72 level recorded in FY24 was way back in FY10 at 60.78 per cent. A higher share of direct taxes is considered progressive as it is linked to income levels compared to indirect taxes that are levied across the board and so, are considered to impact the poor more than the well-to-do.
The time-series data reveals another trend — of personal income tax collections surging higher than corporate tax collections for the second year running. Barring FY22, personal income tax collections have been higher than corporate tax collections for the last four years. FY24 was the second year in a row when personal income tax collection at Rs 10.45 lakh crore was higher than corporate tax collection of Rs 9.11 lakh crore.
This trend marks a reversal from the earlier trend of corporate tax collections being higher than income tax collections before the corporate tax rate cut decision by the government in September 2019, when the corporation tax rate for all existing companies (manufacturing and non-manufacturing) was cut to 22 per cent (without surcharge and cess) from 30 per cent and a tax rate of 15 per cent was announced for newly incorporated domestic companies.
Tax buoyancy — the growth rate of taxes in relation to the economy’s nominal growth rate — grew to 2.12 in 2023-24 from 1.18 in the previous financial year. A level higher than 2 for tax buoyancy was last recorded in 2021-22 (at 2.52) and before that in 2007-08 (at 2.27).
The cost of tax collection — indicating the expenditure on tax collection as a proportion of the total tax collections — inched down to 0.44 per cent in FY24, the lowest level since 2000-01. In absolute terms, though, it increased to Rs 8,634 crore, the highest level since 2000-01, the year for which data is last available by the CBDT.
The increase in collections was accompanied by an increase in returns filed, income tax return filers and taxpayers. Income tax return filers increased to 8.09 crore in FY24 from 7.4 crore in FY23. In assessment year 2023-24, which related to tax data for financial year 2022-23, taxpayers increased to 10.41 crore from 9.37 crore. A taxpayer is a person who either has filed a return of income for the relevant Assessment Year (AY) or in whose case tax has been deducted at source in the relevant financial year but the taxpayer has not filed the return of income.
The state-wise breakup of the direct tax data shows that around 39 per cent of the total direct tax revenue comes from Maharashtra (Rs 7.6 lakh crore in FY24), followed by Karnataka with around 12 per cent share (Rs 2.34 lakh crore) and Delhi with 10.4 per cent share (Rs 2.03 lakh crore).
